Three-dimensional (3D) cell culture has been broadly used to mimic the in-vivo microenvironment. Compared with traditional methods for 3D culture in which cells are embedded within a bulk extracellular matrix, compartmentalized hydrogel microcapsules, such as those with a core-shell structure, provide better mass transfer due to higher surface-to-volume ratio. In addition, such capsules can be fabricated by a multi-fluidic electrostatic co-spraying technique at a high production rate (> 10,000 capsules/min) with nearly monodisperse spherical shape and tunable size, and they can be cultured in suspension for scalable biomanufacturing applications. In this dissertation, I first proved the feasibility of producing complex microcapsules by using the electrostatic co-spraying technique. Then, I demonstrated the applications of core-shell decoupled microcapsules in large-scale production of microtissues, for example, tumoroids, hepatocyte/stromal aggregates, and small intestinal organoids, all of which could be used for applications such as drug screening and disease modeling. Lastly and most importantly, I used the core-shell microcapsules to study the effect of physical confinement on mammary tumorigenesis. It has been known that physical microenvironment, including matrix stiffness, plays an important role in cancer initiation and progression. In this work, I discovered that confinement – a new physical parameter unlike stiffness - can also induce malignant transformation in mammary epithelial cells. I found that MCF10A cells, a benign mammary cell line that forms growth-arrested polarized acini in Matrigel, transforms into cancer-like cells within the same Matrigel material following confinement in alginate shell hydrogel microcapsules. The confined cells exhibited a range of tumor-like behaviors, including uncontrolled cellular growth and invasion. Additionally, 4-6 weeks after transplantation into the mammary fad pads of immunocompromised mice, the confined cells formed large palpable masses that exhibited histological features similar to that of carcinomas. Taken together, my findings not only suggest confinement as a previously unrecognized mechanism for malignancy induction in mammary epithelial cells but also provide a new, microcapsule-based, high throughput platform in therapeutic development for breast cancer.